While the new rules brought upon by the Credit Card Act, Dodd-Frank Act, and the newest Federal Reserve regulations provide increased disclosures to consumers, there are also important loopholes and protections every credit cardholder should be aware of.
Here are 7 tips you need to know.
1. Carry cash or debit for small purchases
The Dodd-Frank Wall Street Reform and Consumer Protection Act allows retailers and other merchants to set a minimum purchase amount for credit card transactions. “The minimum purchase amount must not exceed $10 and does not apply to transactions made with a debit card,” Visa explains on its website.
In the past, some merchants imposed credit card minimums on customers, but did so in violation of card network rules. Vendors can now set a $10 credit card minimum without fear of penalty.
Avoid this potential restriction by always carrying at least $10 or a debit card in your wallet.
2. Under 21? Know the new rules for getting a credit card
Under the Credit Card Accountability, Responsibility and Disclosure Act of 2009, or Credit CARD Act, if you’re under 21 years of age, you must have either sufficient income or assets, or a co-signer to get a credit card. Issuers aren’t required to offer a co-signer option, however. Bankrate.com surveyed some of the major card issuers recently and found that some don’t permit co-signing.
Before submitting an application, check with the card issuer to find out what the policy and procedure is regarding applicants under the age of 21.
3. Save the credit card agreement summary
In addition to the credit card agreement itself, new cardholders must receive a one-page agreement summary, as required by Federal Reserve regulations that took effect July 2010. This summary should highlight the key terms of your contract. File it away for future reference.
4. Watch for changes to existing accounts
Under the CARD Act, issuers must provide notice of certain changes to accounts 45 days before they take effect. For instance, issuers must give 45 days’ advance notice before increasing the required minimum payment. The law doesn’t require advance notice of all changes, however. Changes that don’t have to be announced ahead of time include credit limit reductions and account closures.
Certain changes you can opt out of, such as increases to fees that were disclosed in the account-opening table. To allow for response time to an undesired change, open mail from card issuers immediately.
5. Use credit cards you don’t want to lose
Though the Credit CARD Act banned issuers from charging inactivity fees, nothing prevents an issuer from shutting down an unprofitable account or reducing the credit limit. As our 2010 study of credit card fees shows, a number of card issuers close accounts if they go unused for too long.
While there are no guaranteed ways of preventing an unwanted shutdown, it’s smart to regularly use credit cards you want to keep. Pay in full to stay out of debt.
6. Watch for your FREE credit score if rejected for a credit card or loan
Thanks to a provision in the Dodd-Frank Act, you will soon have the right to see your credit score — for free – if the lender or company has rejected your application or approved you for a higher rate because of your credit report or score. The creditor must send an adverse action notice containing the score used against the consumer, which means that you might even see a credit score not sold to consumers, such as FICO 8 scores.
As of Jan. 1, 2011, access to free credit scores may broaden. New risk-based pricing rules take effect that require creditors to inform applicants in certain cases that they didn’t qualify for the best terms. An exception to that requirement is if the creditor provides a free credit score disclosure to anyone who applies. In other words, if the lender opts to provide free credit scores to all applicants instead of just to applicants who receive bad news, you may get a free credit score just for trying to open an account.
7. Make a payment plan if you have credit card debt
If you have balances on multiple credit cards, use a pay-down strategy to reduce your debt. One effective approach is you make larger payments on the card with the lowest balance, and minimum payments on all other cards, so that smaller debts are paid off more quickly.